“Understand the taxation of capital gains on shares and mutual funds for FY 2022-23 & 2023-24. Explore terms, holding periods, and tax rates. Learn the impact of amendments introduced by the Finance Act, 2023.”
# For shares or units ‘acquired or purchased’ till 31.03.2023
♦ MEANING OF CERTAIN TERMS:
1. Equity Mutual Fund (MF) –
a. 65% of proceeds of fund is invested in equity shares of listed domestic company i.e. Indian Company. or
b. Where Funds invested in another listed fund then –
-
- 90% of proceeds of funds should be invested in another fund; and
- Another fund invest 90% of proceeds of fund in Equity shares of listed domestic company i.e. Indian Company.
2. Debt Mutual Fund – Other than Equity Mutual Funds
♦ PERIOD OF HOLDING: (POH)
| Particulars | Short Term | Long Term |
| Equity Shares / MF | < 1 Year | >= 1 Year |
| Debt Shares / MF | < 3 Years | >= 3 Years |
♦ TAX RATES:
| Particulars | Short Term | Long Term |
| Equity Shares / MF
(STT Paid) |
15% | 10% (above Rs. 1 Lakhs) |
| Equity Shares / MF
(Non STT Paid) |
As per applicable Slab Rate | 20% |
| Debt MF | As per applicable Slab Rate | 20% |
# For shares or units ‘acquired or purchased’ on or after 01.04.2023 (as amended by Finance Act, 2023)
♦ MEANING OF CERTAIN TERMS:
1. Equity Mutual Fund (MF) – same as explained above.
2. Market Linked Debentures (newly inserted as per section 50AA vide Finance Act, 2023)– means any security where underlying principal component is in the form of a debt security and returns are linked to market returns on other underlying securities or indices and includes any security classified as Market Linked Debenture by SEBI.
3. Specified Mutual Fund (simply Debt Mutual Fund) (newly inserted as per section 50AA vide Finance Act, 2023) – Other than Equity Mutual Funds means less than 35% of proceeds of fund is invested in equity shares of listed domestic company i.e. Indian Company
♦ PERIOD OF HOLDING: (POH)
| Particulars | Short Term | Long Term |
| Equity Shares / MF | < 1 Year | >= 1 Year |
| Market Linked Debentures | Doesn’t Matter | |
| Specified MF i.e. Debt MF | Doesn’t Matter | |
♦ TAX RATES:
| Particulars | Short Term | Long Term |
| Equity Shares / MF
(STT Paid) |
15% | 10% (above Rs. 1 Lakhs) |
| Equity Shares / MF
(Non STT Paid) |
As per applicable Slab Rate | 20% |
| Market Linked Debentures / Specified MF i.e. Debt MF | As per applicable Slab Rate | As per applicable Slab Rate |
Let’s understand the amendment by way of an example –
A . Suppose Mr. Pratik invested Rs. 1 Lakhs in Debt Mutual Fund on 27.11.2018 and sold it on 27.11.2022 for Rs. 10 Lakhs i.e. after the period of three years then it will be taxed as under –
| Sr. No. | Particulars | Amounts (in Rupees) |
| 1. | Full Value of consideration | 10,00,000 |
| Less – | Indexed Cost of Acquisition
(1,00,000 x 331/280) Cost Inflation Index FY 2018-19 – 280, FY 2022-23 – 331 |
(1,18,214) |
| 2. | Long Term Capital Gain | 8,81,786 |
| Tax Payable @ 20% | 1,76,357 |
B . Suppose now Mr. Pratik invested Rs. 1 Lakhs in Debt Mutual Fund on 27.11.2023 and sold it on 27.11.2028 for Rs. 10 Lakhs i.e. after the period of three years then it will be taxed as under –
| Sr. No. | Particulars | Amounts (in Rupees) |
| 1. | Full Value of consideration | 10,00,000 |
| Less – | Cost of Acquisition | (1,00,000) |
| 2. | Capital Gain | 9,00,000 |
| Tax Payable @ as per slab rate –
10% 20% 30% |
90,000 1,80,000 2,70,000 |
Author Bio
I have one query I have sold 4.8lakhs share & I have purchased 4.3 lakhs mutual fund . Will my taxable income will reduce . I am seeing the share sold is added for income but not deducted the mutual fund purchased. I have moved from shares to mutual fund.